Monday, November 22, 2010

UK: three quarters think tax avoidance is fraudulent

From the Return of the Public blog, on the Vodafone protests:

Vodafone told Mobile News Online that ‘the idea we had a bill waived is not the case. It is incorrect to suggest there was ever an outstanding tax bill of £6 billion. That was never the case.’

These words do not mean -- despite what they look like at first glance -- that Vodafone did not dodge six billion pounds in tax. Not at all.

The original Private Eye story, clearly based on information from people right in the loop, makes clear what happened. A decade ago Vodafone bought Mannesmann for 180 billion Euros, via a Luxembourg company. Because it was in Luxembourg, the 15.5 billion in income stuffed into Luxembourg by March 2009 -- now heading for 18 billion -- was taxed at less than one percent. An epic court battle began, where Vodafone said it should be taxed at Luxembourg rates, and Britain's beleaguered tax inspectors said it should be taxed at British rates. The legal battle involved, among other things:

Vodafone resisting the taxman’s efforts to get all the information on the deal.

And the matter was settled, eventually, through a nice fireside chat with Dave Hartnett, HMRC's Permanent Secretary for Tax. More specifically:
"Hartnett moved the case from his specialists and lawyers – dismissed in recent comments to the FT as “very intelligent people” suffering from “a black and white view of the law” – to a dimmer but more amenable group to negotiate with Vodafone’s head of tax, John Connors, who until 2007 was a senior official at HMRC working closely with Hartnett on handling big business."
So there was no tax bill yet that could have been "waived" - everything was still up in the air. Vodafone's claim that "the idea we had a bill waived is not the case" may be technically correct - but that's all that can be said for it. Any reasonable person would agree that while a gigantic tax bill may have never been waived - an (appropriately) gigantic tax bill certainly was avoided. HMRC's other claim - that the six billion pounds was an "urban myth" - was not even technically correct.

Some have called this the Philip Green school of tax avoidance: that 'no tax was avoided because none was due.' An argument that involves studiously failing to mention that none was due precisely because of the contortions that were involved in making sure that none was due.

As a subsequent edition of Private Eye notes:

"HMRC accepted a mere fraction of what it was due. . . . Vodafone-style sweetheart deals are set to proliferate as Hartnett promotes an “alternative dispute resolution” system that keeps tax avoidance cases out of the courts and away from public view. Immune to scrutiny, the taxation of the largest corporate tax avoiders becomes a private matter to be decided among friendly mandarins, beancounters and captains of industry."

On a more positive note, Return of the Public notes this, at least:

According to PR Week, in a poll 58% of those asked didn’t buy the urban myth line.

And here is the one we really like:
"When questioned on tax avoidance in general, 24 per cent of respondents said they did not think it was immoral, just good business sense. Three-quarters of respondents said they thought it was fraudulent."
This depends, of course, on people's understanding of the words 'avoidance' and 'fraudulent,' and we didn't see the questions that were asked. Still, amid all the gloom, this big fraction is worth celebrating.


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